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The Economic and Environmental Impacts of Agricultural Subsidies: A Look at Mexico and Other OECD Countries

Par: Karel Mayrand, Stéphanie Dionne, Marc Paquin, Gustavo Alanis Ortega & Luis Fernando Guadarrama Marrón , 2003-09-01

This report analyses the environmental impacts associated with agricultural subsidies. It reviews the related theoretical and empirical evidence and proposes a methodology to classify subsidies and countries according to their level of environmental perverseness. It also analyses the scale and composition of agricultural subsidies in OECD countries and analyses Mexico’s policies in a comparative perspective.

 

Recent work suggests that agricultural subsidies produce social and environmental impacts that are closely related to their effects on production and trade. This report analyses these impacts and reviews the related theoretical and empirical evidence and proposes a methodology to classify subsidies and countries according to their level of environmental perverseness. The report draws on existing literature to show how subsidies generate product, scale, technology, structural and equity effects. It also shows that trade distorting and environmentally perverse subsidies also tend to be the most inequitable and inefficient forms of support. This highlights the potential for a reform of agricultural policies, both in Mexico and in other OECD countries that would aim to reduce the overall level and the proportion of trade distorting/environmentally perverse subsidies, thus improving the effectiveness and efficiency of agricultural support systems.

Economic and Environmental Impacts of Agricultural Subsidies (PDF)
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